1995 (11) TMI 47 - HC - Income Tax

Summary

Issues:
Jurisdiction of Income-tax Officer to impose penalty under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The judgment pertains to the jurisdiction of the Income-tax Officer to impose a penalty under section 271(1)(c) of the Income-tax Act, 1961. The case involved a discrepancy of 1,000 kgs. of aluminium in the stock register of the assessee during the assessment year 1969-70. The Income-tax Officer added Rs. 21,200 to the total income of the assessee, alleging the sale of 1,000 kgs. of aluminium outside the books of account. Subsequently, a penalty of Rs. 20,000 was imposed under section 271(1)(c) by the Income-tax Officer, which was upheld by the Appellate Assistant Commissioner. However, the Tribunal set aside the penalty order, citing jurisdictional concerns under section 274(2) of the Income-tax Act.

The crux of the issue was whether the Income-tax Officer had the jurisdiction to impose the penalty. The Tribunal based its decision on the provisions of section 274(2) of the Income-tax Act, particularly the amendment effective from April 1, 1971. Before the amendment, the amount of penalty determined the jurisdiction, whereas after the amendment, the amount of income concealed became the determining factor for jurisdiction. In this case, the penalty proceedings were initiated post-April 1, 1971, following the assessment order dated September 17, 1971, where an addition of Rs. 21,200 was made.

The High Court referred to the Supreme Court's decision in Varkey Chacko v. CIT [1993] 203 ITR 885 to establish the authority entitled to impose the penalty. The Supreme Court clarified that penalty proceedings should only commence after the assessment order identifies the concealment or inaccurate particulars. Therefore, the Income-tax Officer, at the time of assessment, had the jurisdiction to impose the penalty. Consequently, the High Court ruled in favor of the Revenue and against the assessee, stating that the Income-tax Officer had the authority to levy the penalty under section 271(1)(c) of the Income-tax Act.

In conclusion, the High Court's judgment upheld the jurisdiction of the Income-tax Officer to impose the penalty under section 271(1)(c) of the Income-tax Act, based on the relevant provisions and legal precedents, and directed the case to go back to the Tribunal for further proceedings as per the statement of the case.